medium · Asset-Backed Securities regulatory
A REMIC structure is used for a $1B RMBS transaction. At year 4, one of the mortgages defaults and the trust takes title to the underlying property (REO).
According to REMIC tax rules, how long can the trust hold this property before it is considered a 'prohibited asset' that could jeopardize the trust's tax-exempt status?
- Permanently, so long as the property was acquired lawfully through a bona fide foreclosure sale.
- Only 30 days total, since a REMIC must remain a purely passive vehicle with no management activity.
- Until the end of the third calendar year following the year of acquisition, unless an extension is granted.
- Exactly 12 months, measured strictly from the calendar date on which the foreclosure sale itself formally closed.
Sign up free to see the explanation and track your rank →
More Asset-Backed Securities regulatory practice
- What is the total dollar amount the sponsor must retain, and what is the risk profile comp
- In an ABS true-sale and bankruptcy-remoteness analysis, what principal bondholder protecti
- Which risk is that opinion principally intended to reduce?
- Which choice correctly describes both the position and its minimum regulatory sizing?
- A sponsor transfers 100 million of consumer loans to a bankruptcy-remote SPE and receives
- What gain on sale is recognized?
- Which of the following describes the correct implementation of this requirement?
- In a 'Grantor Trust' structure commonly used for high-grade auto loans, what is a key tax